What’s A ‘Britcoin’?

digital currency. It's being called a CBDC, which is short for Central Bank Digital Currency and afflete nicknamed Britcoin, but some critics are calling it a solution in search of a problem, particularly given the strength of the UK's fintech industry. Here today to join me to talk about this is Bloomberg reporter Emmelinicole. Emily, It's nice to finally be here with you in the studio today. How are you? I'm good, Thanks,

How are you? Are you enjoying London? I am enjoying London very much and rainy for your face, it's very nice and rainy. I'm told that the weather was beautiful yesterday. Today with my arrival, it is clearly changed. Perfect for our little conversation we're about to have absolutely and we're gonna be talking about Britcoin today. So let's just delve straight into it. Chawe, can you briefly explain to us

what a CBDC is. So, a central bank digital currency is a form of government issued money that instead of being on a ledger in the Bank of England and on commercial banks own leasures, it's also backed on blockchain, so it's verifiable there is a token that transfers between this and that. At the minute, it's all a little

bit more up in the air than that. Like, you know, if you get money sent to you in your bank account as a retail user, it looks like you had some numbers in one bank that went to some numbers and other banks. That's actually not quite how it works under the hood. But with CBDCs is a bit more

of a blockchain transfer involved. And at a very basic level, what would be I mean, how would we compare to something like a debit card for everyday use, Probably is no different, I mean most of us, at least in the UK anyway, it's very like digital payments forward, and so spending on your debit card or spending a CBDC is is supposed to look and feel pretty much identical.

The way that it's different and the reason why it's being developed is because at the minute, there are obviously people in crypto that are thinking of ways that they can use currency more fluidly, and so a CBDC, it is hoped, is a way that they can almost compete with the likes of Tether or Circle all these other private staple coins while having it still be government overseen bank money. So basically we've established it lives on a blockchain, but it's not really crypto. I mean, it's it's very

distinct from what we were consider a crypto token. Yeah, it's not decentralized really in any way. It's still very much overseen by government. It's not anonymous either, so everybody knows who you are and where you're sending and how much you're sending it to. The only difference is that

it will be I guess a little bit faster. Potentially, it may be more factable in terms of where you can send it and who you can send it to, because if while it's a compatible once they're developed, then that'll be a little bit easier than at the minute, where for example, you have to get someone's bank account details and have it all verified and all that kind of stuff. So it may be a solution to some

of those issues. But as I said before, we're in a digital economy in the UK already, so a CBDC is something that is probably a little bit more helpful for those in less developed economies where the banking system is a little bit less advanced. This is the main objection here. You look at the former Bank of indiand Governor Irvin King calling it a solution in search of a problem, but simply creating a central bank digital currency.

On the face of it, it's not obvious that it brings about the sort of transformation people often assume it must lead to. What do they mean when they say that, like, and this is not just We should be clear that this is not just in Britain, that this debate is going on. I mean, it's happening everywhere. But what is the point of view? How do you describe the point of view that this is a solution in search of a problem. So in the UK we have something called

Real Time Growth Settlements RTGs. It's a very big system that the Bank has been working on for many many years and is actually currently in the process of quite of an expensive upgrade to that. And that's what enables things to payments to transfer pretty much immediately, Like if I were to send you money via bank transfer right now from UK bank to UK bank. It's almost instant. In other countries, even in the US, where you'd say the economy is pretty advanced, the banking system doesn't quite

match up and it can still take several days. But in the UK anyway, we pretty much have that. And that's why others think of this as a solution and such of a problem, because that issue of instant payment is already solved somewhat. The reason why a CBDC may be useful in the eyes of skeptics because they see the bankers trying to compete with the world of crypto

not get left behind. If other countries are also developing CBDCs, you know, they wonder if there's a digital yeah, or if there's a digital euro, perhaps a digital pound is required in order for us to be able to achieve proper conversion between those different economies. And the other thing is, as you already said, we have the E dollar. Well

very early stages have talked about that. It's actually much further back than our so we're a bit more advanced on the yes exactly, we have the E one would be one that's very far ahead the NIRA in Nigeria, and we're seeing central banks around the world starting to tinker with these kinds of experiments. What is it? Is there anything about britcoin that stands out here? Which class

of CBDCs does it belong to? So what we've been talking about over the last few weeks is mainly the proposals for a retail CBDC, so that's one to be used by U and me. There is also another conversation going on for a wholesale CBDC that would be a digital currency that would enable banks to transfer between each other, so it would help settle larger amounts of capsule between you know, JP Morgan and Gobin Sacks or Santander an HSBC and make that side of the system a little

bit faster. There's more of an argument for a wholesale CBDC. Even the Bank em England Governor Andrew Bailey has said, you know, a whole sale CBDC has quite a few many uses and might actually be something that could really help improve the banking system in this country. But for a resale one, there's there's a little bit more of a limited use case. You know, people could could expect to be paid in a UK CBDC, they could want

to pay their mortgage in it. But it really, at least in terms of what's're already out there, it's pretty similar to what we're used to and in some ways that's kind of important, right It needs to be similar because if the learning curve is too steep, then people want to use it at all. And we'll be right back for more with Bloomberg Crypto reporter Emmaly Nicol. And then there's also the proposal from the Bank am Inland to basically have a limit of how much you can hold.

I believe it was ten thousand to twenty thousand pounds most Yes, between those two, what is that intended to cannot solve for? Is this also into you know, I imagine it has to do with the fear of sucking money out of the deposit system. What's the background of that? Yeah, I think initially, while a CBDC is still in its infancy, you wouldn't want to be able to put everything into it.

It still needs to be tested, it still needs to be trialed to make sure that it works out in the open, and so that initial limit is something that helps banks to kind of maintain a bit of an understanding of exactly how a CBDC works, see how people are using it for several years before they then let it run wild and loose. One of the big concerns with digital currencies is always the idea of people not being able to track what it's being used for, money laundering,

a list of finance. A UK CBDC should be able to counteract all of those things because they're not going to let anybody be private while they're using it. So ideally it should be the same as if you put money in a bank account, you're still going to have

to tell the bank who you are. But there is obviously the concern that if a CBDC becomes something that is interchangeable with other digital currencies around the world, is interchangeable perhaps even with stable coins one day, that could lead to a Daisy chain of finance where then eventually

you're not able to tell who somebody is. And there is there a debate in the UK about privacy when it comes to the development of cb and that the potential launch or bridcoin for sure, that is actually one of the biggest roadblocks to it, so the UK is not one to ever give up their individual privacy if

they if they're going to avoid it. We had a legislative attempt a few years ago to set up a national Register of Identity for us all to have ID cards, something that's pretty common in some other countries but it's not a thing here and there was a very large

public outcright to that. It didn't make it through our houses of Parliament because an is basically people didn't want the government having a register of who everybody is and where they live, and so with a CBDC that was one of the biggest concerns, so that we were giving a state institution, the Bank of England, the right to a repository of information about who everybody is, where they live,

how much money they have. And that's one of the reasons why the commercial banks will be involved in this process because it keeps the Bank of England out of that. It doesn't let them see you know who you are. Everything is partially anonymized in that sense. The banks will know, but the Bank of England won't. If you look at the various levels of pushback from ranging from you know, looking at privacy, which to some extent, as you say, is being addressed, but also this idea that it's a

solution in such of a a problem. As we talked about, what's the main marketing pitch, what's the boees and the government's pitch behind doing this. What are they trying to sell it on right now? Is it convenience? Is it a mix of different things? There's an element of the convenient side, right. They think that if everybody is currently finding stable coins nice and convenient, then they should find

a digital pattern convenient too. There's a little bit of a chicken before the egg though with this right, stable coins still aren't that big. They're definitely not being used for everyday payments at present. The idea is that if crypto continues to grow at the level it is, and that is a possible future, that we will use stable coins for payments one day. And this is the Bank of eng Them wanting to say we're not going to

get left behind with that. Even this, We started talking about UKCBDC several years ago and we weren't expected to even see anything like a CBDC in our hands to be used for at least the second half of this decade. And it's interesting that you mentioned stable coins, because you'd be hard pressed to find a central banker these days who loves stable coins, wouldn't you. I mean, giving what's happened the last year or so, the regular reaction that we've seen in the US. What is the regulatory view

on stable coins right how would you describe it right now? Negative? Right now? Several big regulators, global bodies to national bodies alike have all said that no current stable coin it meets any of the existing standards that are out there a form of digital money, they would not be able to meet the parameters of emoney regimes in the UK, which is the thing they will have to meet in

a few years time when that becomes law. And that is a big problem for stable coin issuers because if the pitch is that they want to become basically a digital pound, but without the Bank of England, they're going to need to meet these rules. Governments are pretty quickly trying to put regimes in place to put parameters around how stable coins are you used, how even the wallets

are able to be used. Those who would store them would need to be registered with regulators too, and so a CBDC is essentially trying to compete with those in a way that will be regulated, will be safe to some extent. Safe assending is and would basically get ahead of stable coins before they can get in there first. So work is proceeding, we're moving ahead, but what does the timetable look right now? Like it's several years at least. I don't know if we have a specific date really,

but it's definitely not imminent. I mean we're still at the stages where we're having to engage with various parties to decide exactly how each thing would look. This is this consultation that's come out from the Bank of England in twenty twenty three is kind of the first real framework that we've had from them in terms of what exactly this might look like, things the specifics of stuff

like you know, twenty thousand pound limits. But there are still engagement forums happening every so often with different parties from the banking sectors to finance sectors, technology sectors to inform the Bank of Bing's work on that we haven't yet decided. For example, if the Bank and will be building its own blockchain to make this all happen on if it will license that. There are banks out there that have already developed into bank assesslement blockchains like JP Morgan.

So those are all options. So in some stable coins are probably somewhere in our future. We don't quite know when, and we don't quite know yet how they will look, taste and fail. Yeah, but the government's a certainly worried, and that's why we're building a chout. Thank you, Emony. Thanks. That was Bloomberg reporter Emily Hall. You can find more of her reporting on the Bloomberg terminal and on Bloomberg dot com. For more, be sure to check out our

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